UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
BRAINTECH, INC.
(Exact name of Registrant as specified in its charter)
Nevada 98-0168932
------ ------------ ----------
(State or other (Commission File No.) (I.R.S. Employee
jurisdiction of Identification No.)
incorporation)
930 West 1st Street, #102
North Vancouver, British Columbia
Canada V7P 3N4
-------
(address of principal executive offices)
Issuer's telephone number: (604) 988-6440
Securities registered pursuant to section 12(b) of the Act
----------------------------------------------------------
None
Securities registered pursuant to section 12(g) of the Act
----------------------------------------------------------
Common Stock, $0.001 par value
(Title of class)
(ii)
Check whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during the
past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No []
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
56,793,311 Common shares with par value of $0.001 as at November 13,
2001.
Transitional Small Business Disclosure Format (check one):
Yes [] No [x].
Index to Exhibits on page 18
Braintech, Inc.
Form 10-QSB
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION..................................1
Item 1. Financial Statements...............................10
Item 2. Management's Discussion and Analysis or Plan of
Operation..........................................11
Item 3. Quantitative and Qualitative Disclsoure about
March Risk.........................................17
Part II OTHER INFORMATION
Item 1. Legal Proceedings..................................18
Item 2. Changes in Securities and Use of Proceeds..........18
Item 3. Defaults Upon Senior Securities....................18
Item 4. Submission of Matters to a Vote of Security
Holders............................................18
Item 5. Other Matters ..................................18
Item 6. Exhibits and Reports on Form 8-K...................18
(iii)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Each of the following items are contained in our Condensed
Consolidated Financial Statements and are set forth herein.
(i) Condensed Consolidated Balance Sheets as of September 30, 2001
(unaudited) and December 31, 2000;
(ii) Condensed Consolidated Statements of Operations (unaudited) for the
period from inception on January 3, 1994 to September 30, 2001 and
for the three and nine month periods ended September 30, 2000 and 2001;
(iii) Condensed Consolidated Statements of Stockholders' Equity (Deficit)
(unaudited) for the period from inception on January 3, 1994 to
September 30, 2001;
(iv) Condensed Consolidated Statements of Cash Flows (unaudited) for the
period from inception on January 3, 1994 to September 30, 2001 and for
the nine month periods ended September 30, 2000 and 2001; and
(v) Condensed notes to Consolidated Financial Statements (unaudited).
1
PAGE>
BRAINTECH, INC.
(A Development Stage Enterprise)
Condensed Consolidated Balance Sheets
(unauditrd)
(Expressed in United States dollars)
====================================================================================
September 30, December 31,
2001 2000
- ------------------------------------------------------------------------------------
(Unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 168,721 $ 899,573
Short-term investments - 6,929
Accounts receivable 69,736 6,878
Inventory 29,479 3,369
Due from related companies 13,262 28,010
Prepaid expenses 30,517 10,121
----------------------------------------------------------------------------------
311,715 954,880
Deposit on lease - 2,297
Fixed assets 198,765 176,895
- -------------------------------------------------------------------------------------
$ 510,480 $ 1,134,072
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 97,804 $ 50,686
Due to related company 6,816 -
----------------------------------------------------------------------------------
104,620 50,686
Stockholders' equity:
Common stock
Authorized: 200,000,000 shares, with $0.001
par value
Issued: 56,793,311 shares (2000 - 45,599,333)
To be issued: nil shares (2000 - 400,000) 56,793 45,599
Additional paid-in capital 9,892,124 9,202,233
Deficit accumulated prior to the development
stage (58,800) (58,800)
Deficit accumulated during the development
stage (9,484,257) (8,105,646)
----------------------------------------------------------------------------------
405,860 1,083,386
- -------------------------------------------------------------------------------------
$ 510,480 $ 1,134,072
====================================================================================
Subsequent events (note 8)
See accompanying condensed notes to consolidated financial statements.
2
BRAINTECH, INC.
(A Development Stage Enterprise)
Condensed Consolidated Statements of Operations
(Unaudited)
(Expressed in United States dollars)
======================================================================================================
Period from
inception on
January 3, 1994 Nine months ended Three months ended
to June 30, September 30, September 30,
2001 2001 2000 2001 2000
======================================================================================================
Sales $ 245,311 $ 47,752 $ 121,312 $ 22,950 $ 44,139
Cost of sales 97,416 13,830 47,361 6,355 12,909
======================================================================================================
Gross margin 147,895 33,922 73,951 16,595 31,230
Operating expenses:
Consulting and contractors 736,561 - - - -
Research and development 2,898,751 305,979 353,543 102,140 62,883
Selling, general and
administrative 5,744,250 1,088,045 517,912 332,341 94,101
Loss on settlement of
litigation 100,000 - - - -
Loss on disposal of
fixed assets 62,676 36,622 - 28,142 -
Write-down of investments 100,000 - - - -
Write-down of intangible
assets 17,189 - - - -
Write-down of organization
costs 17,431 - - - -
---------------------------------------------------------------------------------------------------
9,676,858 1,430,646 871,455 462,623 156,984
- ------------------------------------------------------------------------------------------------------
Operating loss (9,528,963) (1,396,724) (797,504) (446,028) (125,754)
Non-operating:
Interest income 44,706 18,113 22,850 2,738 5,849
- ------------------------------------------------------------------------------------------------------
Net loss for the period $(9,484,257) $(1,378,611) $(774,654) $(443,290) $(119,905)
=======================================================================================================
Loss per share:
Basic and diluted $ (0.34) $ (0.03) $ (0.02) $ (0.01) $ (0.00)
- -------------------------------------------------------------------------------------------------------
Weighted average number of
common shares outstanding:
Basic and diluted 28,130,416 51,220,276 43,615,786 56,578,933 45,598,409
========================================================================================================
See accompanying condensed notes to consolidated financial
statements.
3
BRAINTECH, INC.
(A Development Stage Enterprise)
Condensed Consolidated Statements of Stockholders' Equity (Deficit)
(Unaudited)
(Expressed in United States dollars)
==================================================================================================================
Deficit Deficit
accumulated accumulated Total
Number Common Additional prior to the during the stockholders'
of Stock paid-in development development Equity
Shares amount capital stage stage (deficit)
- ------------------------------------------------------------------------------------------------------------------
Balance, January 3, 1994 17,400,000 $17,400 $ 1,039,271 $ (58,800) $ - $ 997,871
Loss for the period - - - - (1,006,716) (1,006,716)
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 17,400,000 17,400 1,039,271 (58,800) (1,006,716) (8,845)
Loss for the period - - - - (748,310) (748,310)
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 17,400,000 17,400 1,039,271 (58,800) (1,755,026) (757,155)
Common stock transactions
(net of issue costs):
Issued for cash at
$.1895 per share 950,000 950 173,440 - - 174,390
Issued for cash at
$.25 per share 733,333 733 183,167 - - 183,900
Issued for cash at
$.20 per share 3,000,000 3,000 592,500 - - 595,500
Shares issued for
services rendered 1,200,000 1,200 238,800 - - 240,000
Loss for the period - - - - (959,945) (959,945)
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 23,283,333 23,283 2,227,178 (58,800) (2,714,971) (523,310)
Common stock transactions
(net of issue costs):
Issued for cash at
$.20 per share 2,000,000 2,000 396,991 - - 398,991
Issued for cash at
$.15 per share 1,000,000 1,000 148,279 - - 149,279
Shares issued for
services rendered 300,000 300 59,700 - - 60,000
Compensatory benefit of
employee stock options - - 200,000 - - 200,000
Loss for the period - - - - (930,042) (930,042)
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 26,583,333 26,583 3,032,148 (58,800) (3,645,013) (645,082)
Common stock transactions
(net of issue costs):
Issued for cash at
$.25 per share 1,600,000 1,600 398,400 - - 400,000
Issued for cash at
$.20 per share 2,188,000 2,188 435,412 - - 437,600
Compensatory benefit of
employee stock options - - 927,800 - - 927,800
Loss for the period - - - - (2,110,556) (2,110,556)
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 30,371,333 30,371 4,793,760 (58,800) (5,755,569) (990,238)
Common stock transactions
(net of issue costs):
Issued for cash at
$.15 per share 9,800,000 9,800 1,433,950 - - 1,443,750
Issued for cash at
$.20 per share 157,000 157 31,243 - - 31,400
Issued for cash at
$.60 per share 1,010,000 1,010 604,990 - - 606,000
Common stock subscriptions - - 110,270 - - 110,270
Subscriptions receivable - (110) (65,890) - - (66,000)
Compensatory benefit of
employee stock options - - 2,000 - - 2,000
Loss for the period - - - - (1,236,074) (1,236,074)
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999,
carried forward 41,338,333 41,228 6,910,323 (58,800) (6,991,643) (98,892)
4
BRAINTECH, INC.
(A Development Stage Enterprise)
Condensed Consolidated Statements of Stockholders' Equity (Deficit)
(Unaudited)
(Expressed in United States dollars)
================================================================================================================
Deficit Deficit Total
Common stock accumulated accumulated Stockholders'
------------------- Additional prior to the during the Equity
Number of paid-in development development (deficit)
Shares Amount capital stage stage
- ----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999,
carried forward 41,338,333 $ 41,228 $ 6,910,323 $ (58,800) $ (6,991,643) $ (98,892)
Common stock issued for cash
at $0.20 per share
(net of share issue costs) 3,976,000 3,976 790,305 - - 794,281
Subscriptions received in cash - 110 65,890 - - 66,000
Settlement of litigation - - 606,000 - - 606,000
Common stock issued for cash
on subscriptions 285,000 285 (285) - - -
Common stock subscriptions
received in cash - - 730,000 - - 730,000
Common stock to be issued
in settlement of legal claim - - 100,000 - - 100,000
Net loss - - - - (1,114,003) (1,114,003)
- -----------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000, 45,599,333 45,599 9,202,233 (58,800) (8,105,646) 1,083,386
Common stock issued for
promissory notes (note 3) 1,333,334 1,334 198,666 - - 200,000
Less: Promissory notes
receivable for subscription
of common shares (note 3) - - (200,000) - - (200,000)
Common stock issued for
settlement of legal
claim 400,000 400 (400) - - -
Common stock issued for
cash at $0.15 per share
(net of share issue
costs and share
subscriptions received
in 2000) 9,040,189 9,040 607,685 - - 616,725
Common stock issued for
cash at $0.22 per share
(net of share issue
costs) 295,455 295 60,065 - - 60,360
Shares issued for services
rendered 125,000 125 23,875 - - 24,000
Loss for the period - - - - (1,378,611) (1,378,611)
- -----------------------------------------------------------------------------------------------------------------
Balance, September 30, 2001 56,793,311 $56,793 $9,892,124 $(58,800) $(9,484,257) $405,860
=================================================================================================================
See accompanying condensed notes to consolidated financial statements.
5
BRAINTECH, INC.
(A Development Stage Enterprise)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Expressed in United States dollars)
==============================================================================================
Period from
inception on
January 3, 1994 Nine months ended
to June 30, September 30,
2001 2001 2000
==============================================================================================
Cash flows from operating activities:
Loss for the period $ (9,484,257) $ (1,378,611) $ (774,654)
Items not involving cash:
Amortization 221,247 89,175 50,587
Bad debt 75,108 - 2,126
Loss on disposal of fixed assets 62,676 36,622 -
Write-down of investments 100,000 - -
Write-down of intangible assets 17,189 - -
Write-down of organization costs 17,431 - -
Shares issued for services rendered 324,000 24,000 -
Shares issued for satisfaction of
legal claim 100,000 - -
Compensatory benefit of employee
stock options 1,129,800 - -
Changes in non-cash operating
working capital:
Inventory (29,479) (26,110) -
Short-term investments 72 72 -
Accounts receivable (89,273) (62,858) (70,640)
Prepaid expenses (30,517) (20,396) (4,874)
Accounts payable and accrued
liabilities 104,766 47,118 1,837
Deferred revenue - - (21,506)
- ---------------------------------------------------------------------------------------------
Net cash used in operating activities (7,481,237) (1,290,988) (817,124)
Cash flows from investing activities:
Purchase of marketable securities (100,000) - -
Purchase of fixed assets (523,135) (147,667) (115,652)
Purchase of short-term investments (6,929) - -
Proceeds from short-term investments 6,857 6,857 -
Proceeds from notes receivable (130,181) - -
Proceeds from disposal of real estate 306,752 - -
Proceeds from disposal of fixed assets 41,506 - -
Deposit on lease - 2,297 (2,297)
- --------------------------------------------------------------------------------------------
Net cash used in investing activities (405,130) (138,513) (117,949)
Cash flows from financing activities:
Notes receivable 55,073 - 10,130
Loans to directors and officers 7,304 - (35,635)
Due to (from) related companies (19,029) 21,564 47,872
Mortgages payable (207,739) - -
Common shares issued, net of issue
costs 7,975,367 677,085 860,566
-----------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 7,810,976 698,649 882,933
- --------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents (75,391) (730,852) (52,140)
Cash and cash equivalents, beginning
of period 244,112 899,573 431,390
- --------------------------------------------------------------------------------------------
Cash and cash equivalents, end
of period $ 168,721 $168,721 $379,250
============================================================================================
Supplemental information:
Cash paid for interest $ 3,797 $ - $ -
Non-cash financing and
investing activities:
Shares issued for services
rendered 324,000 24,000 -
Shares issued for promissory
notes 200,000 200,000 -
Shares issued for satisfaction
of legal claim 100,000 - -
=============================================================================================
6
BRAINTECH, INC.
(A Development Stage Enterprise)
Condensed Notes to Consolidated Financial Statements
(Unaudited)
(Expressed in United States dollars)
Nine months ended September 30, 2001 and 2000
Three month ended September 30, 2001 and 2000
Period from inception on January 3, 1994 to September 30, 2001
===================================================================
1. DESCRIPTION OF BUSINESS AND FUTURE OPERATIONS:
Braintech, Inc. (the "Company") together with its wholly owned
subsidiary, Braintech Canada, Inc., is a high tech development
company, developing advanced video recognition software. All
sales of its products and services are made in this industry segment.
These consolidated financial statements have been prepared on the
going concern basis under which an entity is considered to be able
to realize its assets and satisfy its liabilities in the ordinary
course of business. The Company has not generated significant
revenues and is continuing to develop its business. Operations to
date have been primarily financed by equity transactions. The Company's
future operations and its continuation as a going concern are dependent
upon its ability to raise additional capital, increase sales of its
products by maintaining its strategic sales alliances with a major
supplier of robotic systems, generating positive cash flows from
operations and ultimately attaining profitability. It is the Company's
intention to focus on developing this alliance and on becoming their
principal supplier of vision systems, raising financing and achieving
profitable operations.
Based on its current financial position, the Company believes that its
present cash resources will be sufficient to pay ongoing cash operating
expenses until approximately the end of January 31, 2002. To continue as
a going concern, the Company will either have to raise additional capital
or begin to generate substantial sales revenue. If the Company cannot do
either by the end of the fourth quarter of 2001, there is a risk that the
business will fail. The consolidated financial statements do not include
any adjustments relating to the recoverability of assets and any
adjustments relating to the recoverability of assets and classification of
assets and liabilities that might be necessary should the Company be unable
to continue as a going concern.
2. BASIS OF PRESENTATION:
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States and
reflect all adjustments (all of which are normal and recurring in nature)
that, in the opinion of management, are necessary for fair presentation of
the interim financial information. The results of operations for the
interim periods presented are not necessarily indicative of the results
to be expected for any subsequent quarter or for the entire year ending
December 31, 2001. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. These
unaudited condensed consolidated
7
financial statements and notes included herein should be read in
conjunction with the Company's audited consolidated financial
statements and notes for the year ended December 31, 2000, as filed
in its annual report on Form 10-KSB.
2. BASIS OF PRESENTATION (CONTINUED):
These consolidated financial statements include the accounts of
the Company, and its wholly-owned subsidiary Braintech Canada,
Inc., incorporated under the Company Act of British Columbia on
March 30, 1994. All material intercompany balances and
transactions have been eliminated.
Certain figures have been reclassified to conform to the financial
statement presentation adopted in the current year.
3. PROMISSORY NOTES:
In conjunction with a private placement completed during the first quarter
of 2001, a director and Chief Financial Officer of the Company issued a
promissory note in the amount of $100,000 in payment for 666,667 common
shares and 333,334 common share purchase warrants. This note receivable
has been recorded as a deduction from stockholders' equity. Each common
share purchase warrant entitles the holder to purchase one additional share
for one year at $0.20 per share. In accordance with an Agreement for
Escrow of Share Certificates dated February 27, 2001, the common share
certificate and warrant certificate issued will remain in escrow until
the Company receives full payment of the $100,000 note receivable.
The amount is due upon demand,
unsecured and no interest is payable on this note.
In conjunction with a private placement completed during the second
quarter of 2001, the Chief Operating Officer and President of the
Company issued a promissory note in the amount of $100,000 in payment
for 666,667 common shares and 333,334 common share purchase warrants.
This note receivable has been recorded as a deduction from
stockholders' equity. Each common share purchase warrant entitles
the holder to purchase one additional share for one year at $0.20 per
share. In accordance with an Agreement for Escrow of Share Certificates
dated June 26, 2001, the common share certificate and warrant
certificate issued will remain in escrow until the Company receives full
payment of the $100,000 note receivable. The amount is due upon demand,
unsecured and no interest is payable on this note.
8
4. STOCK OPTIONS:
A summary of the Company's stock option activity is as follows:
========================================================================
Weighted
Number average
of shares exercise price
- ------------------------------------------------------------------------
Balance, December 31, 2000 4,754,000 $ 0.23
Options granted 950,000 0.25
Options cancelled/expired (316,500) 0.24
- ------------------------------------------------------------------------
Balance September 30, 2001 5,387,500 $ 0.23
========================================================================
Of those outstanding at September 30, 2001, 2,996,250 are
exercisable (2000 - 2,329,000).
5. SHARE PURCHASE WARRANTS:
During the nine months ended September 30, 2001, the Company completed
private placements of 10,373,523 common shares at a price of $0.15 per
share and 295,455 common shares at a price of $0.22 per share. In
conjunction with the private placements, the Company issued 5,334,494
common share purchase warrants (each purchaser received one common share
purchase warrant for each two common shares purchased). Each common
share purchase warrant entitles the holder to purchase one additional
share for one year at $0.20 per share for 5,186,766 of the warrants and
at $0.27 per share for 147,728 of the warrants. The 5,334,494 share
purchase warrants were the only warrants outstanding as at September 30,
2001. There were no cancellation, exercise or expiration of warrants
during the period.
6. COMMITMENTS:
The Company has obligations under operating lease arrangements which
require the following minimum annual payments:
==================================================================
2001 $ 89,054
2002 130,448
- ------------------------------------------------------------------
$ 219,502
==================================================================
7. CONTINGENCIES
The Company is a co-covenanter on a lease that includes the premises
where the Company resides. The part of the premises not occupied by
the Company is currently being sub-leased to a third party. As
co-covenanter on the original lease, the Company is legally responsible
for the rent relating to the portion of the premises let to the
third party. The contingent additional rent totals approximately
$64,000 per year with the lease expiring August 31, 2003.
9
8. SUBSEQUENT EVENTS
(a) PRIVATE PLACEMENT
On October 31, 2001 the Company received $250,000 on account
of a further private placement. No securities have yet been
issued in consideration of these funds.
(b) STOCK OPTIONS
Subsequent to September 30, 2001, the Company granted an
additional 90,000 stock options at an exercise price of
$0.25 and 25,000 stock options were cancelled on termination
of employment. The Company's stock option plan specifies
that an optionee may exercise vested options up to 30 days
subsequent to termination. The terminated employee's options
had vested, however the 30 day exercise period expired on
October 30, 2001 without any of the options being exercised.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
OVERVIEW
Braintech, Inc. was incorporated in 1987. In January 1994, we entered
the technology field.
Since 1994 we have been developing the Braintech Imaging Library, as
well as other software and hardware products used in processing digitised
video information. In 1998, we began to apply our technology and expertise
to the development of machine vision systems for industrial applications.
We have developed machine vision systems for use in product inspection,
location analysis, and parts handling and assembly. In March 2000 we
entered into a strategic alliance with ABB Flexible Automation, a division
of ABB Inc. ABB is a major supplier of industrial robotic systems. Since
entering into our alliance with ABB, we have focused on the development and
implementation of vision guided robotic systems.
We are also developing eVisionFactory ("eVF"), a software environment for
developing, optimising, and supporting industrial automation solutions.
eVF combines vision technology, systems engineering, and a wireless Internet
based service and support system. The Internet based service and support
system is designed to provide technical support through the Internet to
purchasers of our vision guided robotic solutions. The Internet based support
system can also be used to provide technical support to companies operating
other types of industrial machinery and manufacturing systems.
During 2001 we also commenced development of a 3D vision guided robotic system
for use in automotive manufacturing systems. The 3D system uses a single
conventional CCD (Charge Coupled Device) camera. Software algorithms use
information from the camera to determine the position and orientation of
the parts being assembled. That information is used in turn to control
industrial robots operating on the parts. Applications for the system
include material handling, spot welding, machining operations, adhesive and
sealant application, spray painting, automated assembly, and part
identification and inspection.
As of September 30, 2001 we have incurred an aggregate deficit of
approximately $9.5 million during our development and operations stage.
We may continue to incur significant additional operating losses as our
product development, research and development, and marketing efforts
continue. Operating losses may fluctuate from quarter to quarter as a
result of differences in the timing of expenses incurred and
revenue recognised.
We have generated total revenues, from inception on January 3,
1994 to September 30, 2001, in the amount of $245,311.
11
RESULTS OF OPERATIONS
We believe that our limited history of revenue generation and
recent business developments make the prediction of future results
of operations difficult, and, accordingly, our operating results should
not be relied upon as an indication of future performance.
NINE MONTH PERIOD ENDED SEPTEMBER 30, 2001 COMPARED WITH THE
NINE MONTS ENDED SEPTEMBER 20, 2000
Revenue from operations for the nine month period ended September
30, 2001 was $47,752. This amount included:
(a) $24,802 for a vision system used in the manufacture of plastic
fuel tanks; and
(b) $22,950 for a vision system used to locate and inspect automotive
air conditioning systems.
Both systems were sold through our alliance with ABB Flexible Automation.
Cost of sales for the nine month period ended September 30, 2001 were $13,830.
This amount consisted of:
(a) $7,475 for equipment used in, and installation costs relating to,
the fuel tank project; and
(b) $6,355 for equipment and installation costs relating to the air
conditioner project.
Revenue from operations for the nine month period ended September 30, 2000
was $121,312. This amount included:
(a) $65,786 for a brake shoe sorting and inspection system developed
for Satisfied Brake Products Inc.;
(b) $11,387 for the Wizmaster program developed for Sideware Systems
Inc.; and
(c) approximately $44,000 from ABB for two vision systems used in
the manufacture of plastic fuel tanks.
Cost of sales for the nine month period ended September 30, 2000 were $47,361.
This amount consisted of:
(a) $26,105 paid to a systems integrator working on the Satisfied Brake
Products Inc. project; and
(b) approximately $21,000 for equipment and expenses related to the
projects that generated revenue from operations.
12
Research and development expenses decreased from $353,543 for the nine month
period ended September 30, 2000 to $305,979 for the nine month period ended
September 30, 2001. The decrease resulted principally from the following
factors:
(a) During the nine month period ended September 30, 2000 we paid
approximately $88,000 to North Shore Circuit Design for work on the
IMPAC accelerator board. During 2001 we ceased work on the IMPAC
accelerator board, in order to concentrate our efforts on developing
our relationship with ABB. As a result, payments to North Shore Circuit
design have ceased.
(b) Salaries and contract labour allocated to research and development
increased from $239,854 to $279,950.
Selling, general, and administrative expenses increased from $517,912
for the nine month period ended September 30, 2000 to $1,088,045 for
the nine month period ended September 30, 2001. Several factors contributed
to the increase. The principal factors were as follows:
(a) General and administrative salaries increased from
approximately $95,000 to approximately $466,000, due to the hiring
of approximately 9 additional general and administrative employees
uring the nine month period ended September 30, 2001.
(b) Amortization expenses increased from $50,587 to $89,175,
principally as a result of amortization charges in respect of
approximately $148,000 in additional capital assets purchased during
the nine month period ended September 30, 2001. The capital assets
purchased related mainly to the increase in our staff and the increase
in the size of our office premises.
(c) Legal expenses increased from $86,123 to $121,974, principally due
to the cost of filing a registration statement under the
Securities Act of 1933.
(d) Filing and transfer fees decreased from $30,817 to $4,545.
During the nine month period ended September 30, 2000 we incurred
filing fees of approximately $30,000 for the filing of a registration
statement under the Securities Act of 1933.
(e) During the nine month period ended September 30, 2000 we incurred a
foreign exchange loss of $20,484. The comparative figure for 2001
was $4,544. Our foreign exchange losses result principally from
adjusting entries made in respect of transactions recorded in United
States dollars, but actually carried out in Canadian dollars.
(f) During the nine month period ended September 30, 2001, we paid
$14,383 for public relations services. There were no similar
payments during the nine month period ended September 30, 2000.
(g) Travel and trade show expenses increased from $3,262 to $57,017,
principally as a result of attending the International Robots &
Vision Show in Chicago in June 2001.
THREE MONTH PERIOD ENDED SEPTEMBER 30, 2001 COMPARED WITH THE THREE
MONTH PERIOD ENDED SEPTEMBER 30, 2000
Revenue from operations for the three month period ended September
30, 2001 was $22,950. We received this amount from ABB Flexible
Automation for a vision system used to locate and inspect automotive
air conditioning systems.
13
Cost of sales for the three month period ended September, 2001
were $6,355. This amount consisted of equipment used in, and installation
costs relating to, the air conditioning project.
Revenue from operations for the three month period ended September 30,
2000 was approximately $44,000. This amount was received from ABB
Flexible Automation for two vision systems used in the manufacture of
plastic fuel tanks.
Cost of sales for the three month period ended September 30, 2000 were
$12,909. This amount consisted of equipment used in, and installation
costs relating to, the plastic fuel tank project.
Research and development expenses increased from $62,883 for the
three month period ended September 30, 2000 to were $102,140 for the
three month period ended September 30, 2001. The increase resulted
principally from the increase in the number of our research and
development personnel. During the three month period ended September
30, 2000 we made a final payment of $10,319 to North Shore Circuit
Design for work on the IMPAC accelerator board. There was no similar
payment during the three month period ended September 30, 2001.
Selling, general, and administrative expenses increased from
$94,101 for the three month period ended September 30, 2000 to
$332,341 for the three month period ended September 30, 2001.
Several factors contributed to the increase. The principal
factors were as follows:
(a) General and administrative salaries increased from
approximately $13,400 to approximately $179,000, due to the
hiring of approximately 9 additional general and administrative
employees during 2001.
(b) Amortization expenses increased from $21,606 to $27,092,
principally as a result of amortization charges in respect of
approximately $148,000 in additional capital assets purchased
during 2001.
(c) Rent expense increased from $15,089 to $29,602, principally as
a result of our return to office premises which we occupied
previously at Unit 102, 930 West 1st Street, North Vancouver, B.C.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 2001, we completed a private placement
of 7,600,000 shares at a price of $0.15 per share. In addition,
for every two shares purchased, each purchaser received one share
purchase warrant. Each share purchase warrant entitles the holder
to purchase one additional share for one year at $0.20 per share.
Net proceeds from the private placement were approximately $1.1
million.
On June 29, 2001 we completed a private placement of 2,773,523
common shares at a price of $0.15 per share. In addition, for
every two shares purchased, the purchasers received one share
purchase warrant. Each share purchase warrant entitles the
holder to purchase one additional share for one year at $0.20
per share.
Net proceeds from the private placement were approximately
$410,000.
14
On August 30, 2001 we completed a private placement of 295,455
common shares at a price of $0.22 per share. In addition, for
every two shares purchased, the purchasers received one share
purchase warrant. Each share purchase warrant entitles the holder
to purchase one additional share for one year at $0.27 per
share. Net proceeds from the private placement were approximately
$60,360.
On October 31, 2001 we received $250,000 on account of a further
private placement. No securities have yet been issued in
consideration of these funds.
As of November 13, 2001, inclusive of the private placement
proceeds described above, our cash balance is approximately $257,000.
Apart from our cash balance and any revenue we receive from operations,
we have no other sources of liquidity or capital resources.
At our current level of operation, we estimate that our cash
expenses are approximately $160,000 per month. We base this
estimate on the following data:
- - As at November 13, 2001, we have 25 employees. Our salary
costs are approximately $95,000 per month.
- - For the nine month period ended September 30, 2001 our average
monthly general, overhead and administrative costs, exclusive
of salary costs, were approximately $65,000 per month. We expect
that our general overhead and administrative costs, exclusive of
salary costs, will continue to be approximately $65,000 per month
for the balance of 2001 and for the first quarter of 2002.
- - During the year ended December 31, 1999 we paid $204,800, a
llocated to "Research and development", to North Shore Circuit
Design for work on the IMPAC accelerator board. During the
year ended December 31, 2000 we paid $87,751 to North Shore
Circuit Design. We do not anticipate using the services of
North Shore Circuit Design during 2001.
- - During the year ended December 31, 2000 we incurred capital
expenditures of approximately $136,000, principally for leasehold
improvements, furniture and fixtures, and computer equipment.
Between December 31, 2000 and September 30, 2001, we incurred capital
expenditures of approximately $148,000, principally for leasehold
improvements, furniture and fixtures, computer equipment, and computer
software related to the expansion of our staff. We do not expect to
incur significant capital expenditures during the remainder of 2001
and the first quarter of 2002 unless they result from an increase in
our level of operation.
Based on the foregoing, we estimate that our total cash expenditures
for the period November 13, 2001 to March 31, 2001 will be
approximately $725,000. Accordingly, at our current level of operation,
our existing cash balances and subscriptions receivable, together with
the revenue generated by our sales to ABB described below, should be
sufficient to pay our anticipated cash expenditures to approximately
March 31, 2002. To continue as a going concern, we will either have
to raise additional capital or continue to generate substantial sales
revenue. If we cannot do either by the end of the first quarter of
2002, we face the risk that our business will fail.
15
PLAN OF OPERATION
As announced by press releases dated September 25, 2001 and
October 2, 2001, we have received purchase orders from ABB
to supply 19 3D Vision Guided Robotic solutions for engine parts
handling. The systems, which include ABB robots guided
by Braintech vision technology, will be installed at one of
North America's major automaker's engine assembly plants.
The first six systems are scheduled for installation in December 2001,
ten of the systems are scheduled for installation in the first quarter
of 2002, and the remaining three systems are scheduled for
installation in the second quarter of 2002.
Our first priority for the balance of 2001 and the first half of
2002 is to complete the orders we have received from ABB. If we
are successful in completing these orders, the revenues received
should provide the operating cash requirements for approximately
3.5 months.
Our second priority for the balance of 2001 and the first quarter
of 2002 is to continue to build upon our relationship with ABB, to
become the principal supplier Of vision systems to ABB and their
customers. If we are able to obtain additional multi-order contracts
for the design and installation of our vision guided robotic
systems, we believe we could generate sufficient sales revenue to
achieve positive cash flow.
We are taking the following steps to secure additional contracts with ABB.
- - We have hired a sales engineer in the Province of Ontario, Canada,
where the Canadian automotive manufacturing industry is concentrated.
Our Ontario sales engineer provides support to ABB sales representatives
in Ontario, through presentations to potential customers of industrial
vision guided robotic systems.
- - We have installed a single camera 3D demonstration unit in the ABB
plant in Brampton, Ontario for purposes of displaying our vision guided
robotic technology to ABB's customers.
- - We provide proposals to ABB for vision guided robotic components for
systems being sold to ABB customers. As of November 13, 2001 we have
fifteen proposals outstanding, some of which involve multiple systems.
- - We have begun negotiations with ABB's US subsidiary to establish an
alliance similar to the one we have with ABB's Canadian subsidiary.
If we are able to conclude an agreement with the US company we plan
to hire a second sales representative, to be based in the north-eastern
United States, to support ABB sales representatives in that area.
Our third priority during the balance of 2001 and the first quarter of
2002 is to continue the development of eVisionFactory, including our
Internet based service and support system. We expect to release a final
production version of the eVisionFactory program, including the Internet
based service and support system, in the first quarter of 2002.
There is no assurance that our plan of operation will succeed. We have
no assurance of when, if ever, we will secure further contracts for the
sale of vision guided robotic systems.
16
In addition, we have no assurance that we will be able to complete
development of the eVisionFactory program, or that we will be able to
obtain new contracts, or generate sales revenue, through use of that
program.
NEW PREMISES
Effective July 15, 2001 we returned to office premises which we occupied
previously at Unit 102, 930 West 1st Street, North Vancouver, B.C. From
May 1995 to March 2001, we shared those premises with Sideware Systems Inc.
In June 2001, Sideware vacated the premises, and entered into an agreement
to sub-let a portion of the premises to a third party. We will occupy the
remainder of the premises, consisting of approximately 9,800 square feet.
The annual rent for our portion of the premises will be approximately
$92,000 per year. In addition, we will be responsible for costs relating
to property taxes and common area maintenance, totalling approximately
$26,000 per year. The term of the lease expires August 31, 2003.
The lease for the premises at Unit 102, 930 West 1st Street is in the name of
TechWest Management Inc. The lease was made at a time when we shared the
premises with Sideware Systems Inc., and we signed the lease as a
co-covenantor, along with TechWest and Sideware. As co-covenantor on the
original lease, we could also be legally responsible for rent relating to
the portion of the premises which has been let to a third party, if Sideware
Systems Inc. and the sub-tenant both fail to pay that rent. The additional
rent for which we could be liable totals approximately $64,000 per year,
inclusive of operating costs.
We also continue to use a portion of the premises at Suite 1600-777 Dunsmuir
Street, Vancouver, B.C. V7Y 1K4, Canada, for which Sideware holds the lease.
Our current payments for these premises are approximately $450 per month, but
we are not a party to the lease.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
As at September 30, 2001 we have not entered into or acquired financial
instruments that have a material market risk. We have no financial
instruments for trading or other purposes or derivative or other financial
instruments with off balance sheet risk. All financial assets and
liabilities are due within the next twelve months and are classified as
current assets or liabilities in the consolidated balance sheet included
in the financial statements included in this Form 10-QSB. The fair value
of all financial instruments as at September 30, 2001 approximate their
carrying values.
To September 30, 2001, the majority of our revenues and the majority
of our cash costs have been realized or incurred in Canadian dollars.
To date we have not entered into foreign currency contracts to hedge
against foreign currency risks between the Canadian dollar or other
foreign currencies and our reporting currency, the United States dollar.
Generally, however, we attempt to manage our risk of exchange rate
fluctuations by maintaining sufficient net assets in Canadian dollars
to retire our liabilities as they come due.
17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of the date of this quarterly report, we are not involved in any legal
proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
RECENT SALES OF UNREGISTERED SECURITIES
On August 30, 2001, we issued 295,455 common shares at a price of
$0.22 per share to a single arm's length investor pursuant to a
private placement. In addition, for every two shares purchased,
the purchaser received one share purchase warrant. Each share purchase
warrant entitles the holder to purchase one additional share for one
year at $0.27 per share. A finder's fee of $4,640 was paid to
facilitate the transaction. The shares and warrants were
issued to an accredited investor pursuant to exemptions from
registration as set out in Rule 506 of Regulation D under the
Securities Act.
On September 6, 2001, we issued 25,000 common shares at a
deemed value of $0.20 per share on account of services rendered by
Farid Rohani. The shares were issued to an accredited investor
pursuant to exemptions from registration as set out in Rule 506 of
Regulation D under the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not applicable.
ITEM 5. OTHER MATTERS
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
On July 11, 2001, we filed a report on Form 8-K concerning the
appointment of Babak Habibi as a director and the President
of Braintech, Inc.
INDEX TO EXHIBITS
EXHIBITS
INDEX TO EXHIBITS
EXHIBITS NUMBERS EXHIBITS
3.1(1) Articles of Incorporation, dated February 27, 1987
3.2(1) Articles of Amendment, dated July 14, 1998
18
3.3(1) Articles of Amendment, dated June 28, 1990
3.4(1) Articles Of Amendment of the Company, dated February 8,
1993
3.5(1) Articles of Amendment of the Company, dated April 6,
1993
3.6(1) Articles of Amendment of the Company, dated December 6,
1993
3.7 Restated Articles of Incorporation of the Company dated
June 1, 2000
3.8(1) By-Laws of the Company
4.1(1) Specimen Stock Certificate
4.2(2) 1997 Stock Option Plan
4.3(2) 2000 Stock Option Plan
4.4(7) Amended 2000 Stock Option Plan dated November 1, 2000
10.1(1) License Agreement between the Company and Willard W.
Olson, dated January 5, 1995.
10.2(1) Product Development Agreement between the Company and
United Technologies Microelectronic Systems Inc., dated
July 6, 1998.
10.3(1) Manufacturing and Sales Agreement between the Company
and United Technologies Microelectronic Systems Inc.,
dated July 6, 1998.
10.4(1) Operating Agreement between the Company and Sideware
Systems Inc., dated November 1, 1995
10.5(4) Cost Sharing and Allocation Agreement between the
Company and Sideware Systems Inc.
10.6(1) Assignment of Lease and Modification of Lease Agreement
dated August 17, 1998 between HOOPP Realty Inc.,
Techwest Management Inc., Sideware Systems Inc., and
Braintech, Inc.
10.7(4) Software Development and License Agreement dated
September 20, 1999 between the Company and Sideware
Systems Inc.
10.8(4) Lease effective as of July 1, 1999 between the
Company, Techwest Management Inc., Sideware Systems
Inc. and Pacific Centre Leaseholds Ltd.
10.9(4) Assignment Agreement effective as of July 1, 1999
between the Company, Techwest Management Inc.,
Sideware Systems Inc., and SJM Management Ltd.
10.10(4) Agreement between the Company, Mercator Robotec Inc.
and Satisfied Brake Products Inc.
10.11(5) Alliance Agreement dated March 26, 2000 between the
Company and ABB Flexible Automation.
10.12(6) Sublease and Consent to Lease between MGI International
Marine Safety Solutions Inc., Techwest Management Inc.
and HOOPP Realty Inc., and Offer to Lease
10.13(6) Letter agreement with Sideware Systems Inc. dated
November 1, 2000
10.14(7) Bluetooth Specification Early Adopters Agreement
between IBM and the Company dated December 15, 2000
10.15(7) Support and Equipment Lease Agreement between Tactel AB
and the Company dated December 19, 2000
10.16(7) Assignment Agreement between Pacific Centre Leaseholds
Ltd., Techwest Management Inc., Sideware Systems Inc.
and the Company dated January 1, 2001
10.17(7) Mutual Release and Settlement Agreement between Manfred
Kurschner, JMF Management Inc, Techwest Management Inc.
and the Company dated February 1, 2001
19
10.18(7) Agreement between Axis Communications Inc. and the
Company dated January 29, 2001
10.19(7) Agreement for Escrow of Share Certificate & Promissory
Note between Edward White and the Company dated
February 27, 2001
10.20(8) Agreement for Escrow of Share Certificate & Promissory
Note between Babak Habibi and the Company dated June
26, 2001
11.1 Computation of net loss per share
21.1(1) Subsidiaries of the Registrant
(1) Exhibit already on file - exhibit to our Form 10-SB registration
statement filed September 25, 1998.
(2) Exhibit already on file - exhibit to our Schedule 14A proxy
information filed March 1, 2000.
(3) Exhibit already on file - exhibit to our Form S-1 registration
statement filed February 11, 2000.
(4) Exhibit already on file - exhibit to our Form 10-QSB covering
the quarter ended September 30, 1999 filed November 15, 1999.
(5) Exhibit already on file - exhibit to our Form 10-QSB covering
the quarter ended March 31, 2000 filed May 15, 2000.
(6) Exhibit already on file - exhibit to our Form 10-QSB covering
the quarter ended September 30, 2000 dated November 9, 2000.
(7) Exhibit already on file - exhibit to our Form-10-KSB covering
the fiscal year ended December 31, 2000 dated March 29, 2001.
(8) Exhibit already on file - exhibit to our Form S-1/A registration
statement filed July 3, 2001.
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SIGNATURES
In accordance with Section 13 of the Securities Exchange Act of 1934,
the registrant caused this Quarterly Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: November 13, 2001 Braintech, Inc.
"Owen L.J. Jones"
By: Owen L. J. Jones
Director
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
in the capacities and on the dates indicated.
Signature Title Date
"Owen L.J. Jones" Chief Executive Officer, November 13, 2001
- ----------------- Director
Owen L.J. Jones (Principal Executive Officer)
"Babak Habibi" President and Director November 13, 2001
- ---------------------
Babak Habibi
"Edward A. White" Chief Financial Officer, November 13, 2001
- ----------------- Director
Edward A. White (Principal Financial and
Accounting Officer)
"Owen L.J. Jones"
21